Real Estate Disputes

May 2025

The Renters’ Rights Bill (‘the Bill’) is currently making its way through the House of Lords. While there has been growing opposition to the Bill, with over 300 amendments being proposed, the Bill could still prove to be a welcome change for lenders.

Purpose of the Bill

The Bill has been introduced to:

  • give greater rights and protections to people renting their homes
  • provide tenants with the flexibility to leave substandard properties

In short, it is intended to:

  • Reform tenancies
  • Strengthen tenants’ rights
  • Create a landlord redress scheme
  • Create a private rented sector database
  • Create a legal standard for property conditions
  • Expand enforcement powers


The potential impact of the Bill on lenders

Currently, there are two options available to recover vacant possession of a property subject to an assured shorthold tenancy, namely:

  • Serving a notice under section 21 of the Housing Act 1988 (‘HA 1988’)
  • Serving a notice under section 8 of the HA 1988

Section 21 Notice

Also known as a ‘no-fault’ eviction, this is used where a tenancy is coming up to expiry or has already expired.

As a result of Trecarrell v Rouncefield [2020], if the landlord is unable to evidence compliance with the various prescribed requirements, then simply put, they will not be granted a possession order.

Section 8 Notice

A notice under this section can be used in two situations:

– where the tenant has breached the terms of the tenancy, or

– where a lender requires vacant possession of the property for the purpose of exercising their power of sale and is bound by a tenancy postdates the loan.

Notices under Section 8 of the HA 1988 are restrictive for lenders requiring vacant possession. Many grounds under this section can be remedied and it is otherwise limited to tenancies which postdate the loan. In addition, a landlord (borrower) should have also served a notice on the tenant confirming they can rely on this ground to obtain vacant possession (albeit the court has discretion to dispense with this requirement).

 

What the reform could mean for lender’s enforcement

The reform will essentially simplify a lender’s ability to take possession of a property subject to a tenancy.

The intention is to abolish assured shorthold tenancies (and as a consequence, ‘no-fault’ eviction notices) under Section 21 of the HA 1988, and to amend Ground 2 of Schedule 2 of the HA 1988 so that it reads as follows:

The dwelling-house is subject to a mortgage and –

(a) the mortgagee is entitled to exercise a power of sale conferred on him by the mortgage or by section 101 of the Law of Property Act 1925; and

(b) the mortgagee requires possession of the dwelling-house for the purpose of disposing of it with vacant possession in exercise of that power.

For the purposes of this ground “mortgage” includes a charge and “mortgagee” shall be construed accordingly.

This means that lenders will be able to rely on this section whether the tenancy predates or postdates the loan, provided the lender requires vacant possession for the purpose of exercising their power of sale. They need no longer be concerned about evicting a tenant when they are unable to comply with the requirements for prescribed information for tenant deposits and the Deregulation Act 2015, viz. the provision of the How to Rent Guide, EPC, Gas and Electrical Safety Certificates. The main contention under the reform is that tenants will be afforded a four-month notice period, which some lenders may accept as a small quid pro quo.

It is recommended that lenders continue to ask the right questions and continue to carry out their due diligence in respect of tenancies. In terms of lending in the short term/alternative lending space, which is often time critical, such potentially arduous and frustrating requirements need no longer be so. Lenders will now have the flexibility to take a view, knowing that it will not compromise their ability to secure vacant possession should they need to enforce the terms of their loan.

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